Google Using PLA To Boost Revenues: Evercore Partners

Google Inc (NASDAQ:GOOG) plans to increase its revenues by converting its free product search listings into paid product listings. A report from Evercore Partners analyzes such a move from the internet company in the light of “sizing the potential for higher revenues and marketer, or even government, backlash”.

As per the research report, it has analyzed the leading 200 keywords within Google’s Product and Travel categories across three geographies: U.S., U.K., & France. The report believes that the internet company has a good potential to meet the advertisers demand regarding consumer click supply, as the PLA changes will help the company to generate click volume and pricing acceleration. Such changes, as per the report, will also help in “laying important groundwork for other verticals, such as Travel, in addition to dovetailing nicely with Google’s local efforts, given higher anticipated AdWords adoption among SMBs”.

Indicating some near term risk of increased competition, the report suggests on its keyword analysis, “product search revenues disproportionately skew to Google’s larger customers adept at AdWords”. According to this report such a shift from users due to competition is possible only if they are provided with greater choice and speed. The reports says, “we do not anticipate this stirring additional concern within the ongoing FTC investigation”.

The core site changes, helped by persistent attraction for mobile, will help the company in acquiring more click volumes. The report expects that Google Inc (NASDAQ:GOOG) will achieve 35 percent yearly growth in paid click volumes for the third quarter, which compares with 28 percent of growth rate earlier. Apart from this, the report also expects, “pricing improvements will take additional time”. The Ad revenues for the company are expected to improve by 5 percent, to $11.3 billion, while the net revenues could increase by 0.5 percent to $12.3 billion, given “lowered MMIests”. EPS for the internet company is expected to jump by 6 percent to $10.53.

Given the increase of 35 percent in the paid clicks over three months, the report maintains its Overweight rating for the stock, “given attractive valuation (even still), favorable platform improvements, and marketing trends. Google also has a growing advantage across all its major product areas, which is likely to only increase as mapping and social data become more deeply integrated”. Google Inc (NASDAQ:GOOG) will be able to meet the revised targets, as its core businesses (Search, Display, Video) show little sign of slowdown, and also its new “product roll-outs and platform enhancements are hitting a stride, and mobile increasingly seems more friend than foe”.